The First Twelve Months of a Foreign-Owned Indian Subsidiary: A Compliance Checklist

The first year of a new foreign-owned subsidiary is when most compliance gaps are created. The team is focused on hiring and operations; the parent assumes the local advisers have everything in hand, and several one-time obligations fall due in quick succession. This checklist sets out what needs to happen in the first twelve months.

Within the first 30 days

• Appoint the first statutory auditor (within 30 days of incorporation).
• Open the bank account and complete KYC.
• Register the entity and a business user on the RBI’s FIRMS portal.
• Obtain digital signatures for authorised signatories if not done during incorporation.
• Hold the first board meeting and adopt key policies, including authorised signatories.

On receipt of share capital

• Allot shares within 60 days of receiving the funds.
• File Form FC-GPR within 30 days of allotment, with the valuation certificate, FIRC, KYC and company secretary’s certificate.
• Issue share certificates or credit shares in demat form, as applicable.

Within 180 days

• File the declaration of commencement of business, after the subscription money is received.

Registrations for operations

• GST registration in each state of operation.
• Shops and Establishments registration.
• Provident fund and ESI registrations, where applicable.
• Professional tax registration in applicable states.
• Import Export Code, if importing or exporting.

Recurring from day one

• Monthly TDS deposits and quarterly TDS returns.
• Monthly or quarterly GST returns.
• Monthly payroll statutory contributions.
• Board meetings at the required frequency.
• Maintenance of statutory registers and minutes.

At the first year-end

• Close the books for the financial year ending 31 March.
• Complete the statutory audit and, if applicable, the tax audit.
• Obtain the accountant’s report on international transactions for transfer pricing.
• Hold the first annual general meeting within the prescribed time.
• File the financial statements and annual return with the Registrar.
• File the income-tax return.
• File the Annual Return on Foreign Liabilities and Assets by 15 July.

Common first-year mistakes

1. Allotting shares late, or not filing FC-GPR within 30 days.
2. Forgetting the declaration of commencement of business.
3. Missing reverse charge GST on intercompany invoices.
4. Not preparing transfer pricing documentation because "we are small".
5. Missing the first FLA return.

Conclusion

A new subsidiary’s first year sets the pattern for everything that follows. Putting every one-time and recurring obligation into a single calendar at incorporation, with a named owner for each, is the simplest way to start clean.

N. Sudheer, M.Com., FCS, LL.B. is a Partner at A2 Consultants, Hyderabad, advising foreign companies on India entry, FEMA and corporate compliance. Views are personal.